States faced with rapidly rising health care costs are increasingly using changes in provider reimbursement in an effort to slow cost growth associated with the Medicaid program. In particular, states have turned to reimbursement rate cuts as well as attempts to align provider incentives with policymakers' goals. With ongoing Medicaid eligibility expansions brought about by the Affordable Care Act, such actions by state Medicaid programs are likely to become more widespread. There is therefore a critical need to understand the impact of such policies on patient care and access to care. The objective in this research is to determine hospital response to decreases in Medicaid reimbursement rates and to prospective payment on a number of margins related to patient care. This objective will be addressed by studying the impact of two separate policies affecting Medicaid payments to hospitals in California. The first policy was a broad 10% payment reduction to a subset of hospitals in the state, and the second was the shift to a prospective payment system. An economic model of hospital behavior generates two hypotheses: 1) following a broad decrease in reimbursement rates, access to care will decrease for Medicaid patients, and 2) changes in incentives associated with a prospective payment system will lead not only to reduced access to care for Medicaid patients, but also to decreased length of stay and less intense treatment. This project will use data from the California Office of Statewide Health Planning and Development to address each of the following specific aims: 1) measure the impact of reimbursement reductions by Medicaid on patient care in hospitals and 2) quantify the effect of a shift to a fully prospectie payment system on treatment and access to care. Outcome measures include likelihood of hospital admission, hospital-level patient mix by insurer type, inpatient length of stay, and intensity of care. Secondary outcomes measure patient health outcomes in response to changes in hospital behavior, and include hospital readmissions and in-hospital mortality. For each of the patient-level outcomes, analyses will be conducted separately for Medicaid patients (primary effect) and for Medicare/privately insured patients (spillover effect). Difference-in-differences regression techniques will be used in the analyses of both of the specific aims. This research is innovative because it is able to examine the impacts of a broad payment reduction by Medicaid, whereas previous literature has focused on Medicare payments or on relative payment reductions. The proposed research is significant because it will shed light on the impact of cost containment measures on treatment, access to care, and health outcomes. This will benefit the vulnerable Medicaid population and promote public health by encouraging policymakers to consider focusing on policies that promote the efficient provision of care and minimize any negative impacts on patients.